DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2011

DERIVATIVE INSTRUMENTS [Abstract]

DERIVATIVE INSTRUMENTS

NOTE S:  DERIVATIVE INSTRUMENTS

The Company is party to derivative financial instruments in the normal course of its business to meet the financing needs of its customers and to manage its own exposure to fluctuations in interest rates.  These financial instruments have been limited to interest rate swap agreements, commitments to originate real estate loans held for sale and forward sales commitments.  The Company does not hold or issue derivative financial instruments for trading or other speculative purposes.

The Company has entered, at times, into forward sales commitments for the future delivery of residential mortgage loans, and interest rate lock commitments to fund loans at a specified interest rate.  The forward sales commitments are utilized to reduce interest rate risk associated with interest rate lock commitments and loans held for sale.  Changes in the estimated fair value of the forward sales commitments and interest rate lock commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.  At inception and during the life of the interest rate lock commitment, the Company includes the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of the interest rate lock commitments.  These derivatives are recorded at fair value.

The Company utilized interest rate swap agreements as part of the management of interest rate risk to modify the repricing characteristics of certain of its borrowings.  The interest rate swap was designated as a qualifying cash flow hedge and expired December 15, 2011.  See further details of interest rate swap agreements in Note H.

The Company did not have any active derivatives at December 31, 2011 but did utilize them during the year then ended.  The following table presents the Company's derivative financial instruments and the location of the net gain or loss recognized in the statement of income for the year ended December 31, 2011:

		Loss recognized in the
		Statement of Income for the Year
(000's omitted)	Location	Ending December 31, 2011
Interest rate swap agreement	Interest on subordinated debt held by
	unconsolidated subsidiary trusts	($3,246)
Interest rate lock commitments	Mortgage banking and other services	(58)
Forward sales commitments	Mortgage banking and other services	(322)
Total		($3,626)

The amount of gain recognized during the year ended December 31, 2011 in other comprehensive income related to the interest rate swap accounted for as a hedging instrument was approximately $1,980,000.